Mel Payne, Chief Executive Officer, stated, "Our 2014 full year performance was an earning power milestone record with Adjusted Net Income of $24.8 million equal to Adjusted Diluted EPS of $1.34 and Adjusted Net Income Margin of 11.0% on record revenues of $226.1 million, made possible by an extraordinarily strong fourth quarter finish of Adjusted Diluted EPS of $0.38 on record revenues of $59.4 million.Carriage as a consolidation and operating platform for funeral homes and cemeteries has reached an "earning power sweet spot" in maturity and size, as reflected by the leveraging of a 12.9% total revenue increase in the fourth quarter into much larger increases of 25.6% in Total Field EBITDA, 27.8% in Adjusted Consolidated EBITDA, and 52.0% in
Adjusted Diluted EPS.

We fully expect this sustainable earning power trend from existing operations and the value creation leveraging dynamics to continue into 2015 and thereafter and to be supplemented by new, high quality acquisitions from our growing pipeline of top quality acquisition candidates in strategic markets. We are therefore raising our Rolling Four Quarter Outlook range on revenue to $244 - $248 million and Adjusted Diluted EPS to $1.55 - $1.59.

The 2014 year was the third year in our defined Five Year Carriage Good To Great Journey with an annual theme of Carriage Services 2014: Being the Best - One Team, One Vision!Highlights of the year were as follows:

Dave DeCarlo joined Bill Heiligbrodt and me in March as a member of the Executive Team with the primary responsibility of growing the Company by selective, strategic acquisitions;

Entered two large, new strategic markets, New Orleans and Washington, D.C., with the acquisition from SCI in May of five funeral homes and one combination business;

Completed the refinancing in May of all the old high rate components of our balance sheet with low rate $325 million syndicated five year bank credit facilities and $143.75 million seven year convertible subordinated notes;

Established a highly collaborative Operations and Strategic Growth Leadership Team (OSGLT) comprised of the Executive Team and twelve senior leaders representing field operations and Houston Support teams.This group operates informally as owner leaders without titles, direct reports, etc., and addresses all important Carriage value creation matters consistent with One Team, One Vision;

Updated and revised Strategic Acquisition Model criteria and methodologies to directly align with Standards Operating and 4E Leadership Models, and began building a new Strategic Development Team under Dave's leadership focused on building relationships with top quality acquisition candidates in large and medium strategic markets and areas.

Year Ended December 31, 2014

Total Revenue of $226.1 million, an increase of 6.1%;

Adjusted Consolidated EBITDA of $61.7 million, an increase of 10.1%;

Adjusted Consolidated EBITDA Margin up 100 basis points to 27.3%;

Adjusted Diluted Earnings Per Share of $1.34, an increase of 36.7%; and

Adjusted Free Cash Flow of $34.2 million, an increase of 2.8%.

Three Months Ended December 31, 2014

Total Revenue of $59.4 million, an increase of 12.9%;

Adjusted Consolidated EBITDA of $17.1 million, an increase of 27.8%;

Adjusted Consolidated EBITDA Margin up 330 basis points to 28.7%;

Adjusted Diluted Earnings Per Share of $0.38, an increase of 52.0%; and

Adjusted Free Cash Flow of $7.0 million, an increase of 4.0%

We begin the fourth year of our defined Five Year Carriage Good To Great Journey with a company that is materially better in all areas than one year ago.While we understand that public investors must rely on our reported quantitative financial results covering a recent short period of time to judge our progress, the internal qualitative drivers of our increasing quantitative success are our Five Guiding Principles, three innovative operating, leadership and growth models,High Performance Standards, relentless focus on4E Leadership and Right Quality of Staff and the collaboration dynamic across all field operations and Houston Support teams.Linked together, these ideas and concepts form our High Performance Culture Framework of value creation, which we believe will produce superior quantitative results over the
next several years that will attract the best acquisition candidates and talent in our industry to join and contribute to the Carriage Good To Great Journey.

As we successfully execute our three models (Standards Operating, Strategic Acquisition and 4E Leadership) over this year and next to complete our Five Year Good to Great Journey, we fully expect to accelerate the earning power of our Carriage Consolidation and Operating Platform.However, by the end of 2016 we will also have redefined our Carriage Good to Great Journey over a new five year timeframe with new goals, always keeping our Mission of Being The Best and Five Guiding Principles together with shareholder value creation uppermost in mind.Lastly and importantly for our company leadership and employees, I am extremely proud to publicly announce our Good To Great annual theme for this year," concluded Mr. Payne.

"Carriage Services 2015: High Performance through Passion and Partnership!"

TOTAL FIELD OPERATIONS

For the Year Ended December 31, 2014 compared to Year Ended December 31, 2013

Carriage produced Adjusted Free Cash Flow from operations for the year ended December 31, 2014 of $34.2 million compared to $33.2 million for the corresponding period in 2013. The sources and uses of cash for the year ended December 31, 2013 and 2014 consisted of the following (in millions):

Excess tax benefit of equity compensation, net of benefit from Good to Great stock awards

(0.4)

(0.6)

0.6

(0.8)

Other investing and financing activities

0.2

0.1

0.9

1.2

Cash at end of period

$

1.4

$

0.4

$

1.4

$

0.4

ROLLING FOUR QUARTER OUTLOOK RAISED

The Rolling Four Quarter Outlook ("Outlook") reflects management's opinion on the performance of our existing portfolio of businesses for the rolling four quarter period ending December 31, 2015, the performance of the trusts, and our view of the activity within the industry acquisition landscape. This Outlook is not intended to be management estimates or forecasts of our future performance, as we believe such precise rolling estimates will be precisely wrong all the time. Rather our intent and goal is to reflect a "roughly right range" most of the time of future Rolling Four Quarter Outlook performance as we execute our Standards Operating, Strategic Acquisition and 4E Leadership Models over time.

ROLLING FOUR QUARTER OUTLOOK - Period Ending December 31, 2015

Range

(in millions, except per share amounts)

Revenues

$244 - $248

Adjusted Consolidated EBITDA

$70 - $72

Adjusted Net Income

$28 - $30

Adjusted Diluted Earnings Per Share(1)

$1.55 - $1.59

Factors affecting our analysis include, among others, number, size and timing of closing of acquisitions, funeral contract volumes, average revenue per funeral service, cemetery interment volumes, preneed cemetery sales, capital expenditures, execution of our funeral and cemetery Standards Operating Model, Strategic Acquisition Model, Withdrawable Trust Income and changes in Federal Reserve monetary policy. Revenues, Adjusted Consolidated EBITDA, Adjusted Net Income and Adjusted Diluted Earnings Per Share for the four quarter period ending December 31, 2015 are expected to improve relative to the same period in the previous period for the following reasons:

Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA;

Increases in Acquired Cemetery Revenue and Acquired Cemetery Field EBITDA;

Modest increases in Same Store Funeral Revenue and Same Store Funeral Field EBITDA;

Increases in Same Store Cemetery Revenue and Same Store Cemetery Field EBITDA;

Increases in Financial Revenue and Financial EBITDA from trust funds; and

Reduced interest expense in conjunction with the fourth and fifth amendments to our bank credit facilities and the $143.75 2.75% Convertible Notes, including the add-back to Adjusted Diluted EPS of non-tax deductible accretion on the Convertible Notes to reflect the Non-GAAP normalized earning power of the Company.

(1)

The Rolling Four Quarter Outlook on Adjusted Diluted Earnings Per Share does not include any changes to our fully diluted share count that could occur related to a share price increase and EPS dilution calculations related to our new convertible notes, as explained more fully on page 6 in this press release.

CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, February 26, 2015 at 9:30 a.m. CT. To participate in the call, please dial 866-516-3867 (ID-67804537) and ask for the Carriage Services conference call.A replay of the conference call will be available through March 2, 2015 and may be accessed by dialing 855-859-2056 (ID-67804537). The conference call will also be available at www.carriageservices.com. For any investor relations questions, please contact Bill Heiligbrodt at 713-332-8553.

TRUST FUND PERFORMANCE

For the year ended December 31, 2014, Carriage's discretionary trust funds gained 8.3% compared to our 70/30 index benchmark of 5.8%. Over the same period in the discretionary portfolio, the fixed income return was 6.9%, beating the High Yield Index of 2.5% while the equity return was 7.6%, underperforming the S&P 500 at 13.7%. The current yield on Carriage's discretionary fixed income portfolio, which comprises 72% of discretionary trust assets, is 8.5% and the estimated annual income for the discretionary portfolio is approximately $10.8 million.

Investment performance includes realized income and unrealized appreciation (depreciation).

(2)

The 70/30 Benchmark is 70% weighted to the High Yield Index and 30% weighted to the S&P 500 Stock Index.

Asset Allocation as of December 31, 2014(in thousands)

Discretionary Trust Funds

Total Trust Funds

Asset Class

MV

%

MV

%

Cash

$

13,628

7

%

$

29,366

12

%

Equities

36,232

19

%

54,035

23

%

Fixed Income

134,107

72

%

149,622

63

%

Other/Insurance

3,386

2

%

3,629

2

%

Total Portfolios

$

187,353

100

%

$

236,652

100

%

CONVERTIBLE NOTES

On March 13, 2014, when our common stock closed at $17.03 per share, we executed a new seven year convertible subordinated debenture (new convertible notes) in the amount of $143.75 million with a coupon of 2.75% and 32.5% conversion premium equal to a conversion price of $22.56 per share.We used a majority of the proceeds to refinance a traditional 7% coupon, $90 million convertible security due in 2029 (Tides convertible) with a conversion price of $20.44, which was adding 4.4 million shares to our reported fully diluted EPS calculation (24% dilution) when our stock price traded "in the money" above $20.44 even though none of these securities were ever converted into common stock.

In most traditional convertible securities issued prior to the last ten years (including in our refinanced Tides security issued in 1999), full dilution kicks in to the calculation of EPS once the stock price rises above the conversion price (in the money).That will not be the case with our new convertible notes because of highly favorable anti-dilution features (net share settlement). The in the money option value can be settled in cash using any form of financing at our discretion, meaning that depending on the amount of net share settlement need at any time and the financing method selected by management, the actual number of new shares outstanding in the future may differ materially from the technical calculation of EPS pursuant to the share count mechanics of the new convertible notes.

While the mechanics of the in the money payment features on our new convertible notes are somewhat complex, the main points are that dilution is restricted to under 20% of outstanding shares as of the March 19, 2014 issue date (about 3.6 million shares).The new convertible notes become eligible for conversion at $29.33 per share and reach the maximum potential 20% dilution at a price of $54 per share, as the New York Stock Exchange rules restrict the maximum dilution of an unregistered convertible to 20% for any listed member such as Carriage.

We had about 18 million fully diluted shares outstanding when the new convertible notes were issued in March 2014, so it is easy using the chart below to determine the EPS share count dilution calculation as our share price increases over time. For example, at a share price of $26, the threshold of 5% dilution is reached, so 5% of 18 million or 900,000 shares are added to the weighted average number of fully diluted shares for the period whose EPS performance is covered. Likewise, a share price of $32 triggers the 10% dilution threshold or 1.8 million added shares, a share price of $40 triggers the 15% dilution threshold or 2.7 million additional shares, and a $54 share price triggers the 20% dilution maximum threshold adding 3.6 million shares to our EPS calculation for the EPS period covered.

CARRIAGE SERVICES, INC.

OPERATING AND FINANCIAL TREND REPORT

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

% Change

2013

2014

% Change

Same Store Contracts

Atneed Contracts

4,400

4,578

4.0

%

18,149

18,133

-0.1

%

Preneed Contracts

1,188

1,193

0.4

%

4,908

4,641

-5.4

%

Total Same Store Funeral Contracts

5,588

5,771

3.3

%

23,057

22,774

-1.2

%

Acquisition Contracts

Atneed Contracts

1,513

2,079

37.4

%

5,689

7,260

27.6

%

Preneed Contracts

280

387

38.2

%

1,108

1,368

23.5

%

Total Acquisition Funeral Contracts

1,793

2,466

37.5

%

6,797

8,628

26.9

%

Total Funeral Contracts

7,381

8,237

11.6

%

29,854

31,402

5.2

%

Funeral Operating Revenue

Same Store Revenue

$

29,563

$

30,619

3.6

%

$

120,191

$

119,322

-0.7

%

Acquisition Revenue

8,880

12,841

44.6

%

33,660

44,930

33.5

%

Total Funeral Operating Revenue

$

38,443

$

43,460

13.1

%

$

153,851

$

164,252

6.8

%

Cemetery Operating Revenue

Same Store Revenue

$

9,695

$

10,624

9.6

%

$

40,181

$

41,257

2.7

%

Acquisition Revenue

66

565

756.1

%

298

1,599

436.6

%

Total Cemetery Operating Revenue

$

9,761

$

11,189

14.6

%

$

40,479

$

42,856

5.9

%

Financial Revenue

Preneed Funeral Commission Income

$

418

$

400

-4.3

%

$

1,853

$

2,036

9.9

%

Preneed Funeral Trust Earnings

1,794

1,949

8.6

%

7,378

7,447

0.9

%

Cemetery Trust Earnings

1,875

2,051

9.4

%

8,095

8,123

0.3

%

Preneed Cemetery Finance Charges

348

370

6.3

%

1,418

1,410

-0.6

%

Total Financial Revenue

$

4,435

$

4,770

7.6

%

$

18,744

$

19,016

1.5

%

Total Revenue

$

52,639

$

59,419

12.9

%

$

213,074

$

226,124

6.1

%

Field EBITDA

Same Store Funeral Field EBITDA

$

10,004

$

12,050

20.5

%

$

44,973

$

44,756

-0.5

%

Same Store Funeral Field EBITDA Margin

33.8

%

39.4

%

560 bp

37.4

%

37.5

%

10 bp

Acquisition Funeral Field EBITDA

2,743

4,711

71.7

%

10,486

15,718

49.9

%

Acquisition Funeral Field EBITDA Margin

30.9

%

36.7

%

580 bp

31.2

%

35.0

%

380 bp

Total Funeral Field EBITDA

$

12,747

$

16,761

31.5

%

$

55,459

$

60,474

9.0

%

Total Funeral Field EBITDA Margin

33.2

%

38.6

%

540 bp

36.0

%

36.8

%

80 bp

Same Store Cemetery Field EBITDA

$

2,684

$

3,290

22.6

%

$

11,757

$

11,845

0.7

%

Same Store Cemetery Field EBITDA Margin

27.7

%

31.0

%

330 bp

29.3

%

28.7

%

-60 bp

Acquisition Cemetery Field EBITDA

(10)

112

1,220.0

%

(43)

351

916.3

%

Acquisition Cemetery Field EBITDA Margin

-15.2

%

19.8

%

3,500 bp

-14.4

%

22.0

%

3,640 bp

Total Cemetery Field EBITDA

$

2,674

$

3,402

27.2

%

$

11,714

$

12,196

4.1

%

Total Cemetery Field EBITDA Margin

27.4

%

30.4

%

300 bp

28.9

%

28.5

%

-40 bp

Funeral Financial EBITDA

$

1,958

$

2,041

4.2

%

$

7,966

$

8,348

4.8

%

Cemetery Financial EBITDA

2,179

2,358

8.2

%

9,338

9,341

—

%

Total Financial EBITDA

$

4,137

$

4,399

6.3

%

$

17,304

$

17,689

2.2

%

Total Financial EBITDA Margin

93.3

%

92.2

%

-110 bp

92.3

%

93.0

%

70 bp

Total Field EBITDA

$

19,558

$

24,562

25.6

%

$

84,477

$

90,359

7.0

%

Total Field EBITDA Margin

37.2

%

41.3

%

410 bp

39.6

%

40.0

%

40 bp

OPERATING AND FINANCIAL TREND REPORT

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

% Change

2013

2014

% Change

Overhead

Total Variable Overhead

$

1,944

$

2,425

24.7

%

$

8,845

$

10,764

21.7

%

Total Regional Fixed Overhead

538

758

40.9

%

3,346

3,136

-6.3

%

Total Corporate Fixed Overhead

4,819

4,902

1.7

%

20,829

20,227

-2.9

%

Total Overhead

$

7,301

$

8,085

10.7

%

$

33,020

$

34,127

3.4

%

Overhead as a percent of sales

13.9

%

13.6

%

-30 bp

15.5

%

15.1

%

-40 bp

Consolidated EBITDA

$

12,257

$

16,477

34.4

%

$

51,457

$

56,232

9.3

%

Consolidated EBITDA Margin

23.3

%

27.7

%

440 bp

24.1

%

24.9

%

80 bp

Other Expenses and Interest

Property Depreciation & Amortization

$

2,823

$

3,142

11.3

%

$

11,635

$

11,923

2.5

%

Non Cash Stock Compensation

617

920

49.1

%

2,916

3,832

31.4

%

Interest Expense

3,066

2,593

-15.4

%

13,437

10,308

-23.3

%

Accretion on Convertible Subordinated Notes

—

805

—

2,452

Loss on Early Extinguishment of Debt

—

—

—

1,042

Loss on Redemption of Convertible Junior Subordinated Debentures

—

—

—

3,779

Other, Net

—

571

(896)

195

-121.8

%

Pretax Income

$

5,751

$

8,446

46.9

%

$

24,365

$

22,701

-6.8

%

Net Tax Provision

1,519

3,079

9,245

7,255

GAAP Net Income

$

4,232

$

5,367

26.8

%

$

15,120

$

15,446

2.2

%

Special Items, Net of tax except for **

Withdrawable Trust Income

$

281

$

198

$

960

$

1,181

Acquisition and Divestiture Expenses

246

49

496

764

Severance Costs

105

101

965

697

Consulting Fees

90

41

368

277

Other Incentive Compensation

—

—

—

660

Accretion on Convertible Subordinated Notes **

—

805

—

2,452

Costs Related to Credit Facility

—

—

248

688

Loss on Redemption of Convertible Junior Subordinated Debentures

—

—

—

2,493

Loss (Gain) on Asset Purchase

—

379

—

(367)

Securities Transaction Expenses

—

—

160

—

Other Special Items

—

—

(484)

503

Tax Adjustment from Prior Period **

(338)

—

260

—

Sum of Special Items, Net of tax

$

384

$

1,573

309.6

%

$

2,973

$

9,348

214.4

%

Adjusted Net Income

$

4,616

$

6,940

50.3

%

$

18,093

$

24,794

37.0

%

Adjusted Net Profit Margin

8.8

%

11.7

%

290 bp

8.5

%

11.0

%

250 bp

Adjusted Basic Earnings Per Share

$

0.25

$

0.38

52.0

%

$

1.00

$

1.35

35.0

%

Adjusted Diluted Earnings Per Share

$

0.25

$

0.38

52.0

%

$

0.98

$

1.34

36.7

%

GAAP Basic Earnings Per Share

$

0.23

$

0.29

26.1

%

$

0.83

$

0.84

1.2

%

GAAP Diluted Earnings Per Share

$

0.23

$

0.29

26.1

%

$

0.82

$

0.83

1.2

%

Effective Tax Rate

26.4

%

36.5

%

37.9

%

32.0

%

Reconciliation to Adjusted Consolidated EBITDA

Consolidated EBITDA

$

12,257

$

16,477

34.4

%

$

51,457

$

56,232

9.3

%

Withdrawable Trust Income

426

300

1,454

1,788

Acquisition and Divestiture Expenses

372

74

752

1,158

Severance Costs

158

153

1,462

1,056

Consulting Fees

136

62

557

419

Securities Transaction Expenses

—

—

242

—

Other Incentive Compensation

—

—

—

1,000

Other Special Items

—

—

83

—

Adjusted Consolidated EBITDA

$

13,349

$

17,066

27.8

%

$

56,007

$

61,653

10.1

%

Adjusted Consolidated EBITDA Margin

25.4

%

28.7

%

330 bp

26.3

%

27.3

%

100 bp

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31,

2013

2014

ASSETS

Current assets:

Cash and cash equivalents

$

1,377

$

413

Accounts receivable, net

17,950

19,264

Assets held for sale

3,544

—

Inventories

5,300

5,294

Prepaid expenses

4,421

4,590

Other current assets

3,525

7,144

Total current assets

36,117

36,705

Preneed cemetery trust investments

68,341

71,972

Preneed funeral trust investments

97,144

97,607

Preneed receivables, net

24,521

26,284

Receivables from preneed trusts

11,166

12,809

Property, plant and equipment, net

160,690

186,211

Cemetery property

72,911

75,564

Goodwill

221,087

257,442

Deferred charges and other non-current assets

12,280

14,264

Cemetery perpetual care trust investments

42,342

48,670

Total assets

$

746,599

$

827,528

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt and capital lease obligations

$

13,424

$

9,838

Accounts payable

7,046

6,472

Other liabilities

9,939

1,437

Accrued liabilities

12,854

15,203

Liabilities associated with assets held for sale

4,357

—

Total current liabilities

47,620

32,950

Long-term debt, net of current portion

105,642

111,887

Revolving credit facility

36,900

40,500

Convertible junior subordinated debentures due in 2029 to an affiliate

89,770

—

Convertible subordinated notes due 2021

—

114,542

Obligations under capital leases, net of current portion

3,786

3,098

Deferred preneed cemetery revenue

55,479

56,875

Deferred preneed funeral revenue

30,588

31,265

Deferred tax liability

11,915

36,414

Other long-term liabilities

1,548

2,401

Deferred preneed cemetery receipts held in trust

68,341

71,972

Deferred preneed funeral receipts held in trust

97,144

97,607

Care trusts' corpus

41,893

48,142

Total liabilities

590,626

647,653

Commitments and contingencies:

Stockholders' equity:

Common stock, $.01 par value; 80,000,000 shares authorized; 22,183,000 and 22,434,000 issued as of December 31, 2013 and 2014, respectively

222

224

Additional paid-in capital

204,324

212,386

Accumulated deficit

(33,306)

(17,468)

Treasury stock, at cost; 3,922,000 shares at December 31, 2013 and 2014

(15,267)

(15,267)

Total stockholders' equity

155,973

179,875

Total liabilities and stockholders' equity

$

746,599

$

827,528

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

For the Three MonthsEnded December 31,

For the Twelve Months

Ended December 31,

2013

2014

2013

2014

Revenues

$

52,639

$

59,419

$

213,074

$

226,124

Field costs and expenses

38,239

40,492

148,789

156,116

Gross profit

$

14,400

$

18,927

$

64,285

$

70,008

General and administrative expenses

5,583

6,512

27,379

30,293

Operating income

$

8,817

$

12,415

$

36,906

$

39,715

Interest expense, net

(3,066)

(2,593)

(12,622)

(10,308)

Accretion of discount on convertible subordinated notes

—

(805)

—

(2,452)

Loss on early extinguishment of debt and other costs

—

—

—

(1,042)

Loss on redemption of convertible junior subordinated debentures

—

—

—

(3,779)

Other, net

—

(571)

81

567

Income from continuing operations before income taxes

$

5,751

$

8,446

$

24,365

$

22,701

Net provision for income taxes

(1,519)

(3,079)

(9,245)

(7,255)

Net income from continuing operations

$

4,232

$

5,367

$

15,120

$

15,446

Net income (loss) from discontinued operations, net of tax

(233)

11

4,176

392

Net income

$

3,999

$

5,378

$

19,296

$

15,838

Preferred stock dividend

—

—

(4)

—

Net income available to common stockholders

$

3,999

$

5,378

$

19,292

$

15,838

Basic earnings per common share:

Continuing operations

$

0.23

$

0.29

$

0.83

$

0.84

Discontinued operations

(0.01)

—

0.23

0.02

Basic earnings per common share

$

0.22

$

0.29

$

1.06

$

0.86

Diluted earnings per common share:

Continuing operations

$

0.23

$

0.29

$

0.82

$

0.83

Discontinued operations

(0.01)

—

0.18

0.02

Diluted earnings per common share

$

0.22

$

0.29

$

1.00

$

0.85

Dividends declared per common share

$

0.025

$

0.025

$

0.100

$

0.100

Weighted average number of common and common equivalent shares outstanding:

Basic

17,920

18,170

17,826

18,108

Diluted

22,488

18,358

22,393

18,257

The GAAP Diluted EPS and Adjusted Diluted EPS for the three and twelve months ended December 31, 2013 includes 4.4 million shares that would be issued upon conversion of our convertible subordinated debentures (TIDES) as a result of the if-converted method prescribed by accounting standards.

On August 1, 2014, we received notification that the Internal Revenue Service completed its examination of our tax year ended December 31, 2011 citing no change. As a result, we have re-measured our tax liability for unrecognized tax benefits related to personal goodwill which resulted in a tax benefit recognized of $1.7 million and an increase to Deferred tax liability of $5.6 million. The tax benefit reduced the effective tax rate for the year ended December 31, 2014. Additionally, we recognized a credit to interest expense of $0.6 million related to the settled portion of the uncertain tax position.

CARRIAGE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Years EndedDecember 31,

2013

2014

Cash flows from operating activities:

Net income

$

19,296

$

15,838

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

11,748

11,945

Gain on sale of businesses and purchase of assets

(6,091)

(2,150)

Impairment of goodwill

100

1,180

Loss on early extinguishment of debt and other costs

—

1,042

Amortization of deferred financing costs

362

908

Accretion of discount on convertible subordinated notes

—

2,452

Provision for losses on accounts receivable

2,005

2,877

Stock-based compensation expense

3,583

4,622

Deferred income tax expense

12,572

5,295

Loss on redemption of convertible junior subordinated debentures

—

2,932

Other

85

—

Changes in operating assets and liabilities that provided (required) cash:

Proceeds from the exercise of stock options and employee stock purchase plan contributions

894

1,228

Dividends on common stock

(1,817)

(1,840)

Dividends on redeemable preferred stock

(4)

—

Payment of loan origination costs

(621)

(825)

Excess tax benefit of equity compensation

613

3,990

Net cash provided by (used in) financing activities

(19,954)

41,828

Net decrease in cash and cash equivalents

(321)

(964)

Cash and cash equivalents at beginning of year

1,698

1,377

Cash and cash equivalents at end of year

$

1,377

$

413

CARRIAGE SERVICES, INC.

CALCULATION OF EARNINGS PER SHARE

(in thousands, except share and per share data)

Year Ended December 31,

2013

2014

Numerator for basic earnings per share:

Numerator from continuing operations

Income from continuing operations

$

15,120

$

15,446

Less: Earnings allocated to unvested restricted stock

(314)

(295)

Income attributable to continuing operations

$

14,806

$

15,151

Numerator from discontinued operations

Income from discontinued operations

$

4,176

$

392

Less: Earnings allocated to unvested restricted stock

(85)

(8)

Income attributable to discontinued operations

$

4,091

$

384

Numerator for diluted earnings per share:

Adjustment for diluted earnings per share:

Interest on convertible junior subordinated debentures, net of tax

3,454

—

$

3,454

$

—

Income attributable to continuing operations

$

18,260

$

15,151

Income attributable to discontinuing operations

$

4,091

$

384

Denominator

Denominator for basic earnings per common share - weighted average shares outstanding

17,826

18,108

Effect of dilutive securities:

Stock options

175

149

Convertible junior subordinated debentures

4,392

—

Denominator for diluted earnings per common share - weighted average shares outstanding

22,393

18,257

Basic earnings per common share:

Continuing operations

$

0.83

$

0.84

Discontinued operations

0.23

0.02

Basic earnings per common share

$

1.06

$

0.86

Diluted earnings per common share:

Continuing operations

$

0.82

$

0.83

Discontinued operations

0.18

0.02

Diluted earnings per common share

$

1.00

$

0.85

NON-GAAP FINANCIAL MEASURES

This press release uses Non-GAAP financial measures to present the financial performance of the Company.Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.We believe the Non-GAAP results are useful to investors because such results help investors compare our results to previous periods and provide insights into underlying trends in our business. The Company's GAAP financial statements accompany this release.Reconciliations of the Non-GAAP financial measures to GAAP measures are provided in this press release.

The Non-GAAP financial measures include "Adjusted Net Income", "Adjusted Basic Earnings Per Share", "Adjusted Diluted Earnings Per Share", "Consolidated EBITDA", "Adjusted Consolidated EBITDA", "Adjusted Free Cash Flow", "Funeral, Cemetery and Financial EBITDA", "Total Field EBITDA" and"Special Items" in this press release. These financial measurements are defined as similar GAAP items adjusted for Special Items and are reconciled to GAAP in this press release.In addition, the Company's presentation of these measures may not be comparable to similarly titled measures in other companies' reports. The definitions used by the Company for our internal management purposes and in this press release are as follows:

Adjusted Net Income is defined as net income from continuing operations plus adjustments for special items and other non-recurring expenses or credits.

Consolidated EBITDA is defined as net income from continuing operations before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income and other, net.

Adjusted Consolidated EBITDA is defined as Consolidated EBITDA plus adjustments for special items and non-recurring expenses or credits.

Adjusted Free Cash Flow is defined as net cash provided by operations, adjusted by special items as deemed necessary, less cash for maintenance capital expenditures.

Funeral Field EBITDA is defined as Funeral Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.

Cemetery Field EBITDA is defined as Cemetery Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.

Financial EBITDA is defined as Financial Revenue less Financial Expenses.

Total Field EBITDA is defined as Gross Profit less depreciation and amortization, regional and unallocated overhead expenses.

Special Items is defined as charges or credits that are deemed as Non-GAAP items such as withdrawable trust income, acquisition and divestiture expenses, severance costs, loss on early retirement of debt and other costs, discrete tax items and other non-recurring amounts. Special items are taxed at the federal statutory rate of 34 percent for the three and twelve months ended December 31, 2013 and 2014, except for the accretion of the discount on Convertible Notes as this is a non-tax deductible item and the tax adjustment from prior period.

Adjusted Basic Earnings Per Share is defined as GAAP Basic Earnings Per Share, adjusted for special items.

Adjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings Per Share, adjusted for special items.

Certain state regulations allow the withdrawal of financial income from preneed cemetery merchandise and services trust funds when realized in the trust.Under current generally accepted accounting principles, trust income is only recognized in the Company's financial statements at a later time when the related merchandise and services sold on the preneed contract is delivered at the time of death.Carriage has provided financial income from the trusts, termed "Withdrawable Trust Income" and reported on a Non-GAAP proforma basis within Special Items in the accompanying Operating and Financial Trend Report (a Non-GAAP Unaudited Income Statement), to reflect the current cash results. Management believes that the Withdrawable Trust Income provides useful information to investors because it presents income and cash flow when earned by the trusts.

Reconciliation of Non-GAAP Financial Measures:

This press release includes the use of certain financial measures that are not GAAP measures.The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures below.

Reconciliation of Net Income from continuing operations to Adjusted Net Income for the three and twelve months ended December 31, 2013 and 2014 (in thousands):

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

2013

2014

Net Income from continuing operations

$

4,232

$

5,367

$

15,120

$

15,446

Special items, net of tax except for **

Withdrawable Trust Income

281

198

960

1,181

Acquisition and Divestiture Expenses

246

49

496

764

Severance Costs

105

101

965

697

Consulting Fees

90

41

368

277

Other Incentive Compensation

—

—

—

660

Securities Transaction Expenses

—

—

160

—

Accretion of Discount on Convertible Subordinated Notes **

—

805

—

2,452

Costs Related to the Credit Facility

—

—

248

688

Loss on Redemption of Convertible Junior Subordinated Debentures

—

—

—

2,493

Loss (gain) on Asset Purchase

—

379

—

(367)

Other Special Items

—

—

(484)

503

Tax Adjustment from Prior Period **

(338)

—

260

—

Total Special items affecting net income

$

384

$

1,573

$

2,973

$

9,348

Adjusted Net Income

$

4,616

$

6,940

$

18,093

$

24,794

Reconciliation of Net Income from continuing operations to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three and twelve months ended December 31, 2013 and 2014 (in thousands):

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

2013

2014

Net income from continuing operations

$

4,232

$

5,367

$

15,120

$

15,446

Net provision for income taxes

1,519

3,079

9,245

7,255

Pre-tax earnings from continuing operations

$

5,751

$

8,446

$

24,365

$

22,701

Interest expense

3,066

2,593

13,437

10,308

Accretion of discount on convertible subordinated notes

—

805

—

2,452

Loss on early extinguishment of debt and other costs

—

—

—

1,042

Loss on redemption of convertible junior subordinated debentures

—

—

—

3,779

Non-cash stock compensation

617

920

2,916

3,832

Depreciation & amortization

2,823

3,142

11,635

11,923

Other, net

—

571

(896)

195

Consolidated EBITDA

$

12,257

$

16,477

$

51,457

$

56,232

Adjusted For:

Withdrawable Trust Income

$

426

$

300

$

1,454

$

1,788

Acquisition and Divestiture Expenses

372

74

752

1,158

Severance Costs

158

153

1,462

1,056

Consulting Fees

136

62

557

419

Other Incentive Compensation

—

—

—

1,000

Securities Transaction Expenses

—

—

242

—

Other Special Items

—

—

83

—

Adjusted Consolidated EBITDA

$

13,349

$

17,066

$

56,007

$

61,653

Revenue

$

52,639

$

59,419

$

213,074

$

226,124

Adjusted Consolidated EBITDA Margin

25.4

%

28.7

%

26.3

%

27.3

%

Reconciliation of funeral and cemetery income before income taxes to Field EBITDA for the three and twelve months ended December 31, 2013 and 2014 (in thousands):

Funeral Field EBITDA

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

2013

2014

Gross Profit (GAAP)

$

11,057

$

14,537

$

48,874

$

54,102

Depreciation & amortization

1,771

1,782

6,440

6,841

Regional & unallocated costs

1,877

2,483

8,111

7,879

Net financial income

(1,958)

(2,041)

(7,966)

(8,348)

Funeral Field EBITDA

$

12,747

$

16,761

$

55,459

$

60,474

Funeral Field Operating Revenue

$

38,443

$

43,460

$

153,851

$

164,252

Funeral Field EBITDA Margin

33.2

%

38.6

%

36.0

%

36.8

%

Cemetery Field EBITDA

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

2013

2014

Gross Profit (GAAP)

$

3,343

$

4,390

$

15,411

$

15,906

Depreciation & amortization

1,166

1,019

3,739

3,704

Regional & unallocated costs

344

351

1,902

1,927

Net financial income

(2,179)

(2,358)

(9,338)

(9,341)

Cemetery Field EBITDA

$

2,674

$

3,402

$

11,714

$

12,196

Cemetery Field Operating Revenue

$

9,761

$

11,189

$

40,479

$

42,856

Cemetery Field EBITDA Margin

27.4

%

30.4

%

28.9

%

28.5

%

Total Field EBITDA

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

2013

2014

Funeral Field EBITDA

$

12,747

$

16,761

$

55,459

$

60,474

Cemetery Field EBITDA

2,674

3,402

11,714

12,196

Funeral Financial EBITDA

1,958

2,041

7,966

8,348

Cemetery Financial EBITDA

2,179

2,358

9,338

9,341

Total Field EBITDA

$

19,558

$

24,562

$

84,477

$

90,359

Reconciliation of cash provided by operating activities to Adjusted Free Cash Flow from operations for the three and twelve months ended December 31, 2013 and 2014 (in thousands):

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

2013

2014

Cash flow provided by operations

$

8,629

$

8,916

$

39,845

$

36,565

Adjustment for tax benefit from Good to Great stock awards

—

—

—

4,802

Cash used for maintenance capital expenditures

(1,888)

(1,904)

(6,615)

(7,211)

Adjusted Free Cash Flow

$

6,741

$

7,012

$

33,230

$

34,156

Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per share for the three and twelve months ended December 31, 2013 and 2014:

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

2013

2014

GAAP basic earnings per share from continuing operations

$

0.23

$

0.29

$

0.83

$

0.84

Special items affecting net income

0.02

0.09

0.17

0.51

Adjusted basic earnings per share

$

0.25

$

0.38

$

1.00

$

1.35

Reconciliation of GAAP diluted earnings per share to Adjusted diluted earnings per share for the three and twelve months ended December 31, 2013 and 2014:

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2014

2013

2014

GAAP diluted earnings per share from continuing operations

$

0.23

$

0.29

$

0.82

$

0.83

Special items affecting net income

0.02

0.09

0.13

0.51

Dilution effect of convertible junior subordinated debentures

—

—

0.03

—

Adjusted diluted earnings per share

$

0.25

$

0.38

$

0.98

$

1.34

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.In addition to historical information, this Press Release contains certain statements and information that may constitute forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding the consummation of the SCI acquisition, any projections of earnings, revenues, asset sales, cash flow, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or
performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. The words "may", "will", "estimate", "intend", "believe", "expect", "project", "forecast", "foresee", "should", "would", "could", "plan", "anticipate" and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future
acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

the execution of our Standards Operating Model;

changes in the number of deaths in our markets;

changes in consumer preferences;

ability to find and retain skilled personnel;

the effects of competition;

the investment performance of our funeral and cemetery trust funds;

fluctuations in interest rates;

our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;

death benefits related to preneed funeral contracts funded through life insurance contracts;

effects of the application of applicable laws and regulations, including changes in such regulations or the interpretation thereof;

consolidation of the deathcare industry; and

other factors and uncertainties inherent in the deathcare industry.

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see "Risk Factors" in our most recent Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. A copy of the Company's Form 10-K, other Carriage Services information and news releases are available at www.carriageservices.com.

This press release includes the use of certain financial measures that are not GAAP measures.The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures in the tables presented above.